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SINGAPORE (AFP) - The dollar regained momentum against the euro and yen during Asian trade Tuesday but short-term volatility was likely to continue with investors showing renewed appetite for risk, analysts said.
In morning trade, the dollar changed hands at 98.804 yen, up from 98.78 yen in late New York trade Monday. Markets in Japan are closed for the Golden Week holiday and will reopen Thursday.
The euro traded at 1.3388 dollars, down from 1.3408 in New York late Monday and against the yen, it fell to 132.30 from 132.46.
"Sentiment has become so upbeat that it is difficult to go against the trend without a clear negative reversal trigger," said Dariusz Kowalczyk, chief investment strategist with SJS Seymour financial trading firm.
"Risk appetite trades emerged as clear winners," he said in a report. Global stock markets rose sharply Monday and were expected to extend their gains Tuesday on signs the worst may be over for the recession-hit US economy.
When the market is upbeat, investors usually bet on currencies that are riskier but offer higher interest rates, such as the euro.
But the results of the "stress tests" Thursday on the 19 biggest US banks that have received public aid to weather the global financial crisis may jolt investor risk appetite, analysts said.
This would prompt investors to go back to betting on the dollar, which is considered an international safe haven currency.
"US bank stress test results could provide one (jolt), especially amid rumours that more than half of the banks will be asked to raise capital," said Kowalczyk.
Higher risk appetite emerged in recent sessions on hopes the global economy may have seen the worst of the recession and some positive economic indicators from the US economy.
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